New Delhi : Even as India steps up efforts to increase the share of renewable power supply, particularly solar power, its existing thermal power plants, about 90 per cent of which rely on fresh water for cooling, risk facing serious outages because of shortage of water. This shortage could lead to drop in both power generation as well as revenue, a new report by the World Resources Institute (WRI) has warned.

The Indian energy sector’s dependence on increasingly scarce water resources has serious consequences. Between 2013 to 2016, 14 of India’s 20 largest thermal utility companies experienced one or more shutdowns due to water shortages.

The WRI report - Parched power: Water demands, risks and opportunities for India’s power sector - analyzed all of the country's over 400 thermal power plants, and calculated that shutdowns cost the 20-odd companies over Rs 9100 crore ($1.4 billion) in potential revenue from the sale of power. And water shortages canceled out more than 20 per cent of India’s growth in electricity generation between 2015 and 2016.

India remains one of the world’s most important growth markets for energy as the Central Government is looking to link up millions of people across the country to the power grid.

WRI researchers found that nearly 40 per cent of India’s freshwater-dependent thermal power plants experience high water stress. These plants are increasingly vulnerable, amidst India’s ongoing commitment to expanding electricity access for all.

“When power plants rely on water sourced from scarce regions, they put electricity generation at risk and leave less water for cities, farms and families. Without urgent action, water will become a chokepoint for India’s power sector.”

The Indian energy sector’s problem is only set to worsen as the thermal power sector expands and competing water demands increase. The report shows that by 2030, 70 per cent of India’s thermal power plants are likely to experience increased competition for water from agriculture, industry and municipalities.

“Our lack of knowledge about how much water India’s power sector is using makes the problem harder to solve,” said Dr Ivaturi N Rao, Head-Corp Environment & Climate Change for Tata Power, India’s largest integrated power company.

“The Government of India has recently mandated limits for specific water consumption at thermal power plants, which is a critical step forward. However, they should also create policy incentives for water conservation. This will help encourage water efficiency and innovation across the power sector.”

The power sector’s dependence on limited water resources also carries risks for investors. Currently, power plants located in dry areas constitute stranded assets for investors, as they struggle to perform. WRI found that, on average, freshwater cooled thermal power plants located in areas of high water stress had a 21 per cent lower average capacity factor than their peers in low and medium stress regions.

Current regulations by the Union Environment, Forests and Climate Change (MOEF-CC) Ministry and Ministry of Power (MoP) call for increases in plant efficiency and set maximum bounds for water intensity, which should be enacted and enforced.

India already has a robust target that 40 per cent of its power supply will come from renewable sources by 2030, under the Paris Agreement on climate change. WRI found that meeting this target, along with implementing proposed efficiency mandates, can save India’s power sector 12.4 billion cubic meters of freshwater withdrawals.

By prioritizing solar photovoltaic and wind energy in areas of high water stress, India can boost its resilience, save water, and reduce carbon.

However, bosting the share of renewable energy would be a huge financing challenge.

A recent Reuters report that quoted Secretary at the New and Renewable Energy Ministry had indicated that India will need at least $125 billion to fund its ambitious plan to increase the share of renewable power supply in the country’s grid by 2022.

Installed renewable power capacity is currently about 60 gigawats (GW), and India plans to complete the bidding process by the end of 2019-20 to add a further 115 GW of installed renewable energy capacity by 2022, the news report added.

Water is one of the world’s gravest risks, according to the Global Risks Report published earlier this week at the World Economic Forum in Davos. And the situation is actually worse than it might seem at first glance.